This piece is written in my continuing efforts as a trusts, estates and
probate attorney, to inform about the long-term and postmortem effects
of financial decisions made in the present. Even when you have your estate
plan with a
will or a
trust and financial and medical incapacity documents in place, the way in which
you own property and designate beneficiaries on accounts can "trump"
what the will or trust says. The result is the distribution of property
to individuals that are not mentioned in the will or trust. The saddest
cases are where life insurance money will distribute to a divorced former
spouse instead of a surviving child even when the will said all money
and property should be given to the child.
Most people don't know how joint ownership of property and beneficiary
designations will affect their property at death. The form or type of
joint ownership deed affects the way your property is transferred. Typically,
property held as "joint tenants with right of survivorship"
means if one joint owner passes away, the surviving joint owner becomes
the sole owner of the property. The other form of a joint ownership deed
is called "tenancy-in-common." Under this type of ownership,
if one joint owner passes away, then that ownership interest will be distributed
through the decedent's estate where a will or the rules of intestacy
will control who receives the decedent's half interest in the property.
Ultimately, the difference is a joint survivorship deed will pass automatically
to the surviving owner regardless of the decedent's will, but the
joint tenancy-in-common deed will respect what the will says.
When I asked closing attorneys about whether they create only one type
of joint deed instead of the other, I found that in most cases, closing
attorneys are only marginally aware of the difference and the difference
is not discussed with the property buyers. That makes sense because in
a real estate closing, the joint deed type is inconsequential to the end
result of joint ownership of real estate. Where it matters most is if
one of those two owners should pass away as noted above.
When people use a trust to establish their estate plan, often they are
looking for benefits of privacy of their estate and elimination of the
need for probate. If a person with a trust and with real estate passes
away and that real estate remains in the name of the deceased, then the
end result is the loss of estate privacy and the need for probate. Compounded
with that is the additional time, concern and expense of probate and the
lack of success of the original trust-based estate plan.
Parents and seniors often put their child or a trusted friend onto their
checking or cash accounts as an authorized signer in order to help facilitate
daily finances in one's later years. What is not always fully understood
is that at the time the parent or senior passes away, then the authorized
signer actually becomes the owner of that account – again regardless
of what the will says. Controversies – or family fights –
can arise from this situation that could've easily been avoided.
In the end, you will not be around to handle your probate. Your property
will be distributed according to the instructions you leave behind. The
way in which your property is titled and the choices made on account beneficiary
designations are part of those instructions which will partly determine
how your estate will be distributed. Exactly how the estate plan, the
titling, and the beneficiary designations all interact is the standard
legal analysis of the estate planning attorney. There is no way to test
an estate plan to know if it will work properly. Instead, a legal review by a
probate experienced estate planning attorney will give you a proper evaluation and the best opportunity to leave behind
a conflict-free legacy.
Contact us today.